Thursday, May 18, 2006

"Immigration is the greatest anti-poverty program ever devised. The American dream is a reality for many immigrants who not only increase their own living standards but who also send billions of dollars of their money back to their families in their home countries—a form of truly effective foreign aid."

Can we please start making a difference between foreign aid and humanitarian aid? The purpose of foreign aid is to improve the overall economic situation in the receiving country, long term. The money immigrants send back gets spent on food, clothing and medication, not on establishing infrastructure and industry. That's not foreign aid, that's charity.

The fact that each next generation does the same thing - emigrate to support their families at home - is the glaring proof that it doesn't work as foreign aid. As humanitarian aid, it does, but the reason why masses of people leave a country to find work is because there is no work in the home country, and there is no work because there is no infrastructure.

The kid of a Mexican burger cook will not use the money to go to university. Not because he won't want to, of course. But because there's no education to be had, in a Mexican town, for what a burger cook can spare, that would allow the kid to get a job at an investment bank.

To drag an economy out of a ditch, you need industry, and to get industry, you need infrastructure. The purpose of foreign aid is to stabilize the regime, and the proper usage of the money is to build a road network, power plants, establish a qualified labour force, etc. You get this rather large lump of cash and you go out shopping for infrastructure, making big up-front investments to end up with a situation where industry would be attracted to the cheap and qualified labour. Once you have proper facilities within your country that pump money into the economy, you are on your way.

Money sent back by immigrants goes into the lower wrungs of the service sector - food and healthcare. A service economy is called post-industrial for a reason: it comes about as the result of a successful industry initiating a self-sustaining reaction. When you have high local demand for skilled craftsmen, that demand will create the facilities for supply, i.e. good local education. In a healthy industrial nation with easy access to world-class education, it is easy for the son of a factory worker to end up in an investment bank.

So how come after generations of immigrants sending money back to their families, the population is still predominantly impoverished with no chance of improvement? The desire and effort of going to school are commendable, but if there are no good trade schools, industrial corporations will not want to establish factories there, and if there are no factories to take in graduates, there won't be any good trade schools. It's a vicious circle that can only be broken by dumping huge amounts of up-front investment into creating the infrastructure for industry out of nothing.

I live in a country where what I describe happened, and was successful. Estonia has a great economy, to a large extent because of the inordinate amounts of US (early-mid 90s) and EU (more recently) cash being trebuched in our general direction.

Foreign aid, as opposed to humanitarian aid, is given with restrictions. See the example of US foreign aid carrying the rider that it can only be spent at US companies. A great example of this working beautifully is Israel. In this way foreign aid serves two purposes - helping out another country (and thus creating a market both now and in the future), as well as dumping cash into one's local economy without causing mad inflation.

There is a known way for a rich country to spend money on making a poor country rich. This is not charity, as it is in the best interests of the rich country - not just politically but economically. But humanitarian aid, even in the efficient form of migrant workers sending money back to their families, ain't it.

Monday, May 08, 2006

I know I've talked about the matter before, so I apologize, but the exchange in the above link is too good to pass up.

Although blogs are still a fairly minor phenomenon in readership if not visibility, there is certainly a subculture of bloggers, with its own set of virtues. The object of adoration for bloggers is content, and the ability to produce content is central to any blogger's sense of self-worth.

Now, because the phenomenon of blogs can be traced back to before simple tools became widely available, there are two interconnected, but distinct types of blog. The newer type, of which AnTyx is an example*, consists of articles. The older type consists of links to interesting articles elsewhere. While it may seem like content aggregators are a Web 2.0 thing, they have actually been around in the time of Web 1.0. In fact they were around in the time of Web 0.1, a time before Google, when actually finding content was a task upon itself.

Jalopnik, as a business venture and part of the Gawker corporation, is an aggregator. They have recently started posting reviews and road tests, but most of the website is filled with links to articles, news or just random stuff on other websites.

It's different from a category on Reddit by the fact that they provide a paragraph or so of commentary. And this seems to give them a huge sense of self-importance, closely intertwined with insecurity, about being a source of content. Most of the time, they are not, even if they do think themselves good enough to regularly criticize actual print media**. Being called an aggregator is, in blog circles, a mortal insult.

---* I'm not a blogger, thank you. I'm a writer, a technical writer by day job, a linguist by education, a journalist by experience. AnTyx has a very minor readership - two dozen daily visitors or so - and its only point is as an archive. When I write something, I want to see it freely available. If nobody cares, that's fine.

** I called Robert Farago on his "Between the Lines" thing, and he asked for my credentials. Since a reader of AnTyx may have legitimate reason to ask, "and who the fuck are you, Flasher T, to criticize others?", I'll be happy to present them. I've written for mainstream media since I was 11, briefly ran the automotive section of IGN.com, and freelanced for the entertainment section of the Baltic Times before deciding I'd had enough of the bullshit and I'd really much rather work in a software development company. Jalopnik brushes off demands for basic literacy with the argument that they've never claimed to be either professional or writers; well, I'm both, and I say that a blogger nitpicking on the work of people who actually managed to get a job at a proper newspaper is at best sour grapes, and much more likely simply being a dick.

Monday, May 01, 2006

As I mentioned before, Estonia is going through a housing boom right now. The reason for it, or rather for it being quite this wild, is said to be the overall growth of the economy and the related confidence of people taking out loans.

Now, the economy certainly has a lot to do with it, but it doesn't really have much to do with confidence. Estonia has been independent for the last fifteen years, and for barely twenty before that. Now, we certainly don't intend to be conquered any time soon, but it does make it rather silly to have any sort of faith in the next thirty years.

I've found that one's big decisions are often enough not hard at all. I've got friends who admire my ability to advise on matters with rare clarity of vision, but really this is nothing more than a habit of analyzing factors from an objective standpoint. If you can be objective, you will often see that one of the choices is obviously better than the others.

A studio apartment in a new building in Tartu currently costs around 700,000 EEK/45,000 Euro. With the required 25% down payment*, a 25-year loan gives you a monthly payment of around 2500 EEK. (Magic number!) This is what I now pay for my studio apartment in a Soviet-era building, unrenovated. I've actually got a good deal, too. Under these circumstances, as soon as one has the cash for a down payment, one really has no choice but to go out and get a mortgage.

Of course, prices in Estonia are currently more or less insane. (We also pay $4.30 per gallon of regular, on an average national net salary of 650 bucks.) I've explained why I'm shooting for a new building, but a similarly-sized apartment in a Soviet block, slightly fixed up, will actually cost more or less the same. Still, with a mortgage margin of half a percent (plus inflation, represented by the EURIBOR index)**, you have the option of either putting a sizeable portion of your salary into your own equity, or putting it into some guy's bank account. No matter how overpriced the apartment, it still makes infinitely better sense that renting.

Under existing circumstances in Estonia, the fact that house prices are inflated is irrelevant.

The down payment of 25% on a 700,000 EEK flat is 175,000EEK. A monthly mortgage/rent payment of 2500EEK means 30,000EEK per year. If you want to invest the down payment to cover your rent, you would need a return of 17% annually. Now, my pension fund apparently grew by 33% last year, but that's still got very little money in it (I'll be 22 this Sunday) so I don't really care. There is no secure way of investing your money with a guaranteed 17% earnings. For most people, their down payment is likely to come from selling the family real estate and splitting it among siblings; it has a very real chance of being the last time they'll see this sort of money, at least for a very long time. Risky investments are unacceptable.

Estonians are highly territorial and domestic. Owning your home is fundamental. It's something that you absolutely must do if you can at all.

-----*Muppet recently bought a house with 5% down. In Estonia this couldn't happen. OK, fine, you can buy a home with no money down whatsoever if you've got additional collateral that's worth at least 25% of the place, but otherwise it's simply banking rules. This has the fortunate side-effect of avoiding a situation where house prices drop and you end up owing more on the mortgage than the value of the property. You start out owning at least a quarter of it. If prices drop that much overnight, you've got bigger problems to worry about***.

**And remember, you get 23% of all the interest you pay back from the government.

***Despite negative population growth, Estonia's cities have a very real deficit of supply in living space. Now, we seem to be past the most ludicrous point and the prices are levelling off, dropping a bit because the speculators want their investment back. But even if the economy stops soaring, people will not easily trade in their new apartments for cheaper ones. Cheaper means smaller, and at the discussed price point it doesn't really get much smaller. There simply isn't enough cheap apartments for people down on their luck to move into. Tallinn's ghettos have largely been yuppified. Since for apartment prices to drop rapidly, you would need a large amount of people - significantly exceeding demand - to panic and drop their property on the market, taking anything anyone would offer, this scenario can only be caused by the economy getting comprehensively fucked. Estonia's economy is oriented at the world economy in general, we work for Europeans and Americans. If we can have this sort of growth in decades of market crashes and oil wars, the only thing that can kill our economy is an actual, proper shooting war unfolding on our territory. Which is when the size of your mortgage becomes an utter non-issue.